[Federal Register Volume 78, Number 114 (Thursday, June 13, 2013)]
[Rules and Regulations]
[Page 35559]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-14018]



Internal Revenue Service

26 CFR Part 1

[TD 9612]
RIN 1545-BA53

Noncompensatory Partnership Options; Correction

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Correcting Amendment.


SUMMARY: This document contains corrections to final regulations (TD 
9612) that were published in the Federal Register on Tuesday, February 
5, 2013 (78 FR 7997) relating to the tax treatment of noncompensatory 
options and convertible instruments issued by a partnership. The final 
regulations generally provide that the exercise of a noncompensatory 
option does not cause the recognition of immediate income or loss by 
either the issuing partnership or the option holder. The final 
regulations also modify the regulations under section 704(b) regarding 
the maintenance of the partners' capital accounts and the determination 
of the partners' distributive shares of partnership items. The final 
regulations also contain a characterization rule providing that the 
holder of a noncompensatory option is treated as a partner under 
certain circumstances.

DATES: This correction is effective on June 13, 2013 and is applicable 
on or after February 5, 2013.

FOR FURTHER INFORMATION CONTACT: Benjamin Weaver, at (202) 622-3050 
(not a toll-free number).



    The final regulations that are the subject of this document are 
under sections 171, 704, 721, 761, 1272, 1273, and 1275 of the Internal 
Revenue Code.

Need for Correction

    As published, the final regulations (TD 9612) contains an error 
that may prove to be misleading and is in need of clarification.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Correction of Publication

    Accordingly, 26 CFR part 1 is corrected by making the following 
correcting amendments:


Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority:  26 U.S.C. 7805 * * *

Par. 2. Section 1.704-1 is amended by revising the third sentence of 
paragraph (b)(5) Example 32(v) to read as follows:

Sec.  1.704-1  Partner's distributive share.

* * * * *
    (b) * * *
    (5) * * *
    Example 32. * * *
    (v) * * * Under paragraph (b)(4)(x)(c) of this section, LLC must 
allocate the book gross income of $3,000 equally among A, B, and C, 
but for tax purposes, however, LLC must allocate all of its gross 
income ($3,000) to C. * * *
* * * * *

Martin Franks,
Chief, Publications and Regulations Branch, Legal Processing Division, 
Associate Chief Counsel (Procedure and Administration).
[FR Doc. 2013-14018 Filed 6-12-13; 8:45 am]